A vacation home is oftentimes a quintessential part of childhood memories, family trips & once-in-a-lifetime experiences. They are typically passed down from generation to generation where they can be used to create new memories for years to come. Most owners put a lot of time, energy, and sacrifice into saving and purchasing a getaway home, so, ideally, they want to leave it for their children to share with their own children and then their children and so forth. Makes complete sense, right?
Fun Fact: According to Saving the Family Cottage: A Guide to Succession Planning for Your Cottage, Cabin, Camp, or Vacation Home, more than 80% of these homes are owned free and clear of any debt which means they should represent a part of the owner’s estate. Whether those receiving it wish to keep it for the memories or sell it for their children’s college fund matters not if there is NO plan put into place for the property.
Estate plans are great options in theory; however, any co-owner of the property can force a sale. Let’s say mom and dad leave the Jersey Shore home to their 5 children. Four of the five love the idea of having it and creating memories, but the other one has no interest in doing so and would rather have the money to put toward Joey’s room and board at college in California come fall. If the siblings cannot buy him out, guess what? Sibling 5 can force the sale of the property and this can cause turmoil, emotional and sociological distress.
What about a Limited Liability Corporation (LLC)? This option can leave your family with an interest in the home, which prevents forced sales but allows for kind goodbyes. Of course, an experienced attorney would need to draw this paperwork up and there is much more to it; but, it does provide an alternative option that permits the kids to have rights and obligations governed by the agreement.
Another alternative is to transfer the home to a Family Limited Partnership (FLP). This will not negatively impact the chain of title and it will be protected from liens or clouds on the title. No one child will have an interest which will prevent any debt assumption from the other children.
Do your children even want the Jersey house? Have you asked? Although there may be amazing moments and celebrations that were created there, maybe they don’t have that same idea in mind when they look ahead with their children. Although it can be difficult to understand, since you have put a lot of time and money, and sacrifice into purchasing and maintaining the home, it may be that one of your 5 children would rather you leave them with the El Camino, family dog, or their Super Yacht. Prepare yourself for their response and remember – you want to do what is best for them even if it means crushing your dreams.
The bottom line, talk to someone before making any moves.
Contact KABB LAW today for a consultation that can help you figure out what to do, where to go, how to divide, and create a life plan in the event of a catastrophe, untimely accident, or just the natural course of life: 216-991-KABB.